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WHERE TO GET STARTED?
So, what does all this mean? To me, it means that blockchain is a fascinating technology that does hold a lot of
promise, particularly in solving those tricky multi-enter-prise supply chain problems. But it also means one needs to
truly appreciate how it is different from other technologies
and how and where to apply it. Otherwise, its successes will
be few and far between.
As an investor, when evaluating blockchain-based start-
ups, I look for some patterns:
b Is there a reason why a simpler, centralized model would
be unacceptable? If your problem can be solved using a
simpler system, do it. But if you are leery of creating undue
reliance on a third party, blockchain may be a good solu-
tion. However, you should only resort to blockchain if the
centralized model clearly is “dead on arrival.”
b Are the business problems that the solution solves centered
on intercompany processes? Blockchain is best suited for
processes and problems involving multiple parties, such as
improving food traceability. That’s where you’ll tend to get
a payoff from the effort required for setting up a blockchain
system.
b Does the solution involve simple, well-defined, highly
transactional processes with few or no variations? Developing
a blockchain for complex processes with variants across
geographies and verticals will be tough. You need some-
thing simple. Think of Bitcoin: A sends money to B. That’s
it. It doesn’t change. That’s the type of situation you need.
b Is there a stable, broadly accepted data standard? Getting
all of the business partners to adopt blockchain will be easi-
er if they already send and receive the same data. The fewer
different data standards for that transaction, the better.
b How much data does each transaction require? In block-
chain, all nodes hold all data. The more data that is held in
the system, the more expensive and slower it will be, and the
more likely “off-chain” data stores will be needed, which
opens up a whole new set of challenges.
b Does the solution have a fairly distributed value proposition for all business partners? Again, this comes down to
getting partner adoption. If only one party benefits from
the solution, why would the others adopt and comply with
it? Brute force rarely works well as a form of persuasion. If
all parties naturally benefit, then adoption will go viral.
If the supply chain business problem you’re trying to
solve exhibits these characteristics, then blockchain is
probably right for you. It is an exciting technology, and the
journey ahead will likely be more successful in the end. n
Editor’s note: Andy Stinnes is a venture partner with venture
capital firm Cloud Apps Capital Partners.
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